The country had forecast 3.3 percent growth for 2015.

"Decline in world oil prices and the national currency devaluation had a negative impact on Azerbaijan's economy," Ilham Aliyev told a government meeting.

"Reasons for such a difficult situation are outside our country and these reasons are rather political, than economic," he added.

Aliyev said the non-oil sector grew by 8.4 percent last year.

Economic growth in Azerbaijan has slowed dramatically since the oil boom of 2003-2007, when the economy expanded by an average of 21 percent per year.

The Azeri economy is now suffering from low energy prices and the repercussions of an economic crisis in neighbouring Russia.

Oil and gas account for 95 percent of Azeri exports and 75 percent of government revenues, making the Caspian Sea republic particularly vulnerable.

Azerbaijan withdrew support for its currency, the manat , on Dec. 21, triggering losses of 47.6 percent against the dollar, after burning through over half its foreign currency reserves to defend it against the effect of falling oil prices.

Baku's decision followed similar moves by crude exporters Russia and Kazakhstan and underscored the pressure that low prices are exerting on the public finances of oil-dependent countries in the former Soviet Union.

In February, the central bank had allowed the manat to fall 33.5 percent against the dollar and 30 percent against the euro after abandoning a dollar peg and adopting a dollar-euro basket to manage the exchange rate.

Azerbaijan's budget for 2016 is based on an estimated oil price of $50 per barrel, down from $90 last year. Gross domestic product is forecast to grow 1.8 percent this year. 

 

(Reuters)